How will customers buy food in future?
Everything used to be so clear: You went to the store to do your shopping. Today’s consumers now have a few other options at their disposal. They can submit their shopping list online and pick up their orders later in the store. Or they can simply have their orders delivered to their doorstep. Sophisticated shop and logistics systems with state-of-the-art warehouses at their centre ensure that customers quickly receive their online orders.
Those days have almost faded from our memories: Back in the mid-1990s, grocery shopping in Germany could be a pretty nerve-racking affair. Shops closed on weekdays at 6:30 p.m. – except on “long Thursday” – and at 2 p.m. on Saturdays. German lawmakers would not allow them to stay open for longer. The law was eventually loosened. Shop owners who so desired could remain open until 8 p.m. from Monday through Friday and until 4 p.m. on Saturdays. The authority for shop hours was then passed on to the states. The result was a wider shopping window for consumers depending on where they happened to live. Today, it is much easier for them. Many REWE and PENNY stores now remain open until late in the evening. Customers can also head to one of about 90 REWE pickup-service stores around the country to collect, within a matter of minutes, the items they ordered online.
The delivery service REWE began in 2011 that now serves 75 cities makes online shopping even easier. Market researchers are convinced that more and more people will discover the benefits of this shopping option in years to come.
It won’t just be young, tech-savvy consumers who will increasingly do their shopping from the comfort of their own living room couches. Provided, of course, that the price and speed are right: The products should not cost more than they do in the stationary store. The delivery costs should not be too high, and the sales process should move as quickly as possible.
These are certainly some high hurdles for internet retailers to clear. Particularly because food shipping is considered to be the ultimate test in online retailing – for obvious reasons. Fresh, pressure-sensitive products like fruit and vegetables must be handled differently from textiles or books on their journey to the customer. Added to this are different temperature requirements. During the entire logistics process for food, a number of temperature zones must be observed and constantly maintained. Smart, automated food fulfilment centres (FFC) that facilitate fast, effective picking of goods help online food retailers to meet customers’ demands for quality, freshness and delivery speed.
As a pioneer in the online supermarket segment, REWE realised at an early stage that a store-based delivery service for customers did not have much of a future. In 2014, REWE began to supply the Cologne region and the city of Aachen from an approximately 5,000-square-metre FFC in Hürth, a city near Cologne. Since then, the company has opened seven other FFCs across Germany. The time could now be ripe for the next generational change in warehouse logistics – to provide customers with even more quality and service. This summer, a unique FFC for Germany will go into operation in northern Cologne after a year-long construction phase – a facility with floor space the size of two and a half football pitches and the gross cubic volume of 250 single-family homes. This is enough space for more than 20,000 different products. The outer dimensions are just one aspect of the FFC. The inner “values” are something else entirely. Together with highly respected partners like Knapp AG, a leading specialist for warehouse logistics and warehouse automation, REWE has developed a completely new process that is tailored to meet the special demands of online food retailing. The FFC 2.0 uses a much greater degree of technology and process optimisation than previous warehouse generations did.
“With the new food fulfilment centre 2.0, we’re taking a key step as a first mover in Germany and will be able to provide customers with an appealing online shopping experience in future as well.”Jan Kunath, Deputy CEO of REWE Group
Does this represent the future of food picking in online retailing? REWE is determined to find out. No comparable project exists. Many processes are new. But one thing is for certain: The job profile of warehouse employees is completely changing. In future, they will no longer serve as a “personal shopper” for customers, someone who manually handles every order until the package is ready for shipment. “Today, logistics employees walk 12 kilometres to 15 kilometres per shift to pick orders,” says Christoph Eltze, Chairman of the Board of REWE digital. “The new warehouse reverses the process: The products are easily and conveniently driven to the picker by automated shuttle technology. And the whole process is done in compliance with different cooling requirements and REWE’s own high-quality standards.”
The work done under this “product-to-person principle” dramatically reduces picking times and facilitates the shortest-possible order lead times. “With the new food fulfilment centre 2.0, we’re taking a key step as a first mover in Germany and will be able to provide customers with an appealing online shopping experience in future as well,” says Jan Kunath, the Deputy CEO of REWE Group who oversees the combine’s digital business activities. This means one thing specifically: In future, online shoppers will receive their products even faster and enjoy higher quality, completeness and reliability. More comfort and more service for customers: REWE is well prepared for the days in the near future when food consumers will switch shopping channels more frequently, from offline to online or a mix like the pickup service.
Until then, much will be tested, fine-tuned and tested once again. A pioneering product takes time to reach maturity. As a result, the first-generation FFCs will initially remain the state of the art. Like those used by BILLA, Austria’s leading online food retailer: Since May 2017, one FFC there has been doing the job that seven BILLA stores once did in the Vienna metropolitan area: receipt, manual picking and delivery of products ordered online. The benefit for the customer: The guaranteed delivery window has been cut to just two hours. The selection of products in the online shop is just as broad as the range found in stores – the entire selection of about 8,000 products is available. The FFC combines the best of two worlds, the analog and the digital. Employees bake fresh goods, slice cold cuts to order and search for fruit that has reached peak ripeness. These processes are backed up by state-of-the-art technical equipment. Innovative logistics apps, for instance, help to manage the huge number of orders, check them for completeness and correctly load them. “With the food fulfilment centre, we are clearly positioning ourselves as the innovation leader in online food retailing in terms of product freshness, speed, and service and delivery reliability,” says Robert Nagele, the Chief Executive of BILLA.
PENNY launches online shop in 2017
There is no doubt about it: Food shipping is the Olympic discipline in online retail. But the job of selling non-food items online requires some special expertise, too. In the summer of 2017, PENNY began to demonstrate how this is done with the online shop it developed together with colleagues from REWE digital. Customers can go to www.penny-onlineshop.de around the clock and order selected sale items like small kitchen appliances, office supplies, sporting goods and garden tools. The range is complemented by about 30 wines, sparkling wines and other alcoholic beverages. The online sales channel supplements and enhances the assortment found in stores. These facilities frequently lack the space needed to display and store a large range of non-food items, many of which are bulky, for a long time. Unlike products in the stores, the sales items offered in the PENNY online shop can be sold for an extended period.
The items are shipped from a warehouse in the Czech Republic town of Bor, which is located 30 kilometres from the border with Germany and directly on the motorway between Prague and Nuremberg. Other REWE Group online shops are logistically managed here as well. Drivers pick up the ordered packages in Bor, drive them over the border and then feed them directly into the German distribution network. The customer ultimately receives the goods within two to three days. The online shop also enables PENNY to learn more about the needs of its customers, test new offers and review the expansion of the assortment.